The Australian sharemarket has finished the past week strongly, despite a slight dip on Tuesday due to growing speculation of an August rate cut from the RBA. If a rate cut does indeed ensue, it is likely to be due to sluggish local consumer prices rather than any global fears from Brexit. Due to the possibility of a rate cut, the Australian dollar has also fallen slightly against the Greenback to finish at US 75.11c.
What does this mean for you?
If rates continue to drop, the reality of lower investment returns may well and truly be upon us. Gone are the good old days of high inflation, which made property prices skyrocket, and interest rates soar to match. Our previous financial returns modelling was conducted on an average rate of return of 9% per year, but now we're working more conservatively. Around 6% pa is more realistic in today's climate, for a balanced portfolio. This means you need to consider the following: If overall returns are staying lower than they have in the past, will you have enough to retire?
It is important to start thinking about this now and make the changes required so that you are able to safely retire to a standard of living that is not dramatically compromised. You might consider strategies such as working longer, downsizing your house, spending less, saving more, or taking on more risk with your investments.
Achieving the right balance so that you can plan for a secure and peaceful retirement is something we can help you with. If you would like to review your current structures, contact us today on 5482 2855.